Australian and International Pilots Association v Qantas Airways Limited and another [2011] FWAFB 3706 (6 September 2011) FAIR WORK AUSTRALIA DECISION Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 Sch. 3, Items 10 and 12 - Application to vary pre-reform or transitional award Australian and International Pilots Association v Qantas Airways Limited and Jetconnect Limited (C2009/11363) JUSTICE BOULTON, SENIOR DEPUTY PRESIDENT SENIOR DEPUTY PRESIDENT DRAKE COMMISSIONER HAMPTON SYDNEY, 6 SEPTEMBER 2011 Qantas Shorthaul Pilots' Award, 2000 [Transitional]- application to vary - ambiguity or uncertainty in award coverage provision - addition of new employer respondent - requirements of Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 - requirements of ss.557 and 559 of the Workplace Relations Act 1996 - request by employees - eligibility rules - coverage of Jetconnect pilots - extra-territorial operation of legislative provisions. DECISION OF JUSTICE BOULTON AND COMMISSIONER HAMPTON [1] On 21 December 2009, the Australian and International Pilots Association (AIPA) filed an application with Fair Work Australia (FWA) to vary a transitional instrument, the Qantas Shorthaul Pilots’ Award, 2000 [Transitional] (the Award). In the application, AIPA lists the variations sought as follows: 1. Add Jetconnect Limited (Jetconnect) as a respondent to the Award; and 2. Vary clause 5 of the Award to clarify that the definition of Qantas short haul operations includes any operation that forms part of the Qantas short haul operations that is conducted by a wholly-owned subsidiary of Qantas Airways Limited (Qantas), and/or (in particular) that it includes Jetconnect’s operations. [2] The application came before Commissioner Thatcher for hearing and was later, following an application by AIPA, referred to a Full Bench by the President pursuant to s.615 of the Fair Work Act 2009 (the FW Act). Commissioner Hampton was appointed to this Full Bench by the President in accordance with s.622(3) of the FW Act following the retirement of Commissioner Thatcher. This occurred after the final hearings were conducted in this matter. Commissioner Hampton has, in accordance with s.623 of the FW Act, made his decision having regard to all of the evidence and submissions already before FWA. [3] The application was amended by AIPA on 11 August 2010 in order to add further grounds relating to a possible transmission of business from Qantas to Jetconnect. However these grounds were not pursued by AIPA in the final hearings. [4] Essentially, AIPA pursued its application on two bases: (i) to remove an ambiguity or uncertainty in the Award, pursuant to item 10(1)(a) of Part 3 of Schedule 3 to the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Transitional Act), and (ii) to add Jetconnect as a respondent to the Award, pursuant to item 12 of Part 3 of Schedule 3 to the Transitional Act and ss.557 and 559 of the Workplace Relations Act 1996 (WR Act). [5] The substantive hearing of the application by the Full Bench took place in February and April 2011. On 1-3 and 7-8 February the parties called various witnesses to give testimony and on 22 February and 11-12 April the parties were given the opportunity to speak to the written submissions which had been filed. [6] The witnesses included the following persons from AIPA: Stephen Fyfe, a Qantas pilot who worked for Jetconnect from February 2010 to February 2011; and Steven Anderson, the secretary of AIPA. Witness statements from Fred Vernon, a former Jetconnect pilot and Bradley Francis Hudson, Vice President of AIPA and Short Haul Representative, were also relied upon by AIPA. [7] Qantas called the following witnesses: Paul James Daff , the Head of Jetconnect since May 2009; Grant Lilly, the Regional General Manager New Zealand and Pacific Islands for Qantas, since 2006; Richard John Tobiano, an A380 Captain employed by Qantas, who was the General Manager B737 Operations for Qantas from 2002 - 2009; and Thomas Peter Quinn, an A380 Captain employed by Qantas, who was employed by Jetconnect as General Manager from May 2008 to May 2009. A witness statement was also filed by Qantas on behalf of William Cromwell Hodge, Associate Professor of Law at the Faculty of Law, University of Auckland. [8] The background to the application may be set out in brief terms as follows. [9] Jetconnect is a wholly-owned subsidiary of Qantas. It was established by Qantas in 2001 as a wholly-owned limited liability company registered in New Zealand. When Jetconnect first started operations it employed cabin crew from a New Zealand base to on-hire to Qantas for its long haul operations and to some New Zealand domestic operations conducted on behalf of Qantas. [10] In October 2002 Jetconnect was certified by the Civil Aviation Authority of New Zealand (CAANZ) as an Aircraft Operator under the Qantas brand and commenced to operate passenger services on behalf of Qantas on domestic New Zealand routes. In September 2003 Jetconnect commenced to operate trans Tasman services on behalf of Qantas, initially with only one or two round trips per day. The pilots were New Zealand residents, based and trained in New Zealand and the aircraft were leased from Qantas. [11] The basic arrangements as between Qantas and Jetconnect have remained unchanged from the time that Jetconnect commenced to operate trans Tasman services for and on behalf of Qantas in September 2003. These arrangements include the leasing of B737 aircraft from Qantas under Operating Agreements, with the aircraft being registered in New Zealand and operated by Jetconnect under its own Air Operators Certificate (AOC) issued by CAANZ. The aircraft bear Qantas livery and have a sticker near the door which says “Operated by Jetconnect on behalf of Qantas Airways Limited.” The trans Tasman services operated by Jetconnect have Qantas flight numbers, with the flight schedules being determined by Qantas in consultation with Jetconnect. Jetconnect does not control its routes or destinations, but contracts to Qantas to operate on routes and destinations determined by Qantas. Qantas is responsible for marketing and ticketing all its trans Tasman services, both those operated by Qantas and those operated by Jetconnect. [12] The pilots employed by Jetconnect on the trans Tasman services wear Qantas uniforms and have an Airport Identification Card issued by CAANZ containing a card number and a Qantas staff number. The Jetconnect pilots are trained by Qantas and are eligible to become members of the New Zealand Air Line Pilots Association Industrial Union of Workers (NZALPA). The Jetconnect pilots who are members of NZALPA are covered by the Jetconnect Collective Employment Agreement 2008-2011 , which was negotiated between Jetconnect and NZALPA under New Zealand industrial laws. All other Jetconnect pilots are employed under individual employment agreements. [13] Since September 2003, when Jetconnect commenced conducting a small number of trans Tasman flights on behalf of Qantas, the number of trans Tasman routes it flies for Qantas has increased and the number of flights operated by Qantas itself has decreased. Before June 2009, Jetconnect operated seven aircraft on 4 domestic lines of flying and 3 trans Tasman lines of flying. However since Jetconnect ceased operating domestic flights in New Zealand in about June 2009, it has been operating 6 lines of flying using seven aircraft on trans Tasman services. Jetconnect uses B737 aircraft to operate trans Tasman flights to and from Auckland and Wellington and Qantas uses B737 and A330 aircraft to operate services to and from Auckland, Christchurch and Queenstown. By January 2011, Jetconnect was operating approximately 154 flights per week on these services and Qantas was operating approximately 52 flights per week. [14] In January 2011, Qantas advised AIPA representatives that under the March 2011 Schedule for B737s flying the trans Tasman services would be undertaken by Jetconnect. This involves a further increase in flights on the trans Tasman services undertaken by Jetconnect and a reduction in the flights undertaken by Qantas. [15] In February 2011 Jetconnect employed 95 operational pilots, all of whom are residents of New Zealand holding New Zealand Airline Transport licenses. Eighty six pilots are members of the NZALPA and are covered by the Jetconnect Collective Employment Agreement. The remaining pilots are covered by individual employment agreements. Primary contentions of the parties [16] AIPA submitted that the Award should be varied to include Jetconnect as a respondent and/or to clarify the definition of Qantas short haul operations in the Award so as to include Jetconnect’s operations. [17] It was contended that Jetconnect pilots are eligible to be represented by AIPA and that pilots have requested that the application be made to vary the Award. The Jetconnect pilots are engaged to fly only for Qantas and are treated as if they are Qantas pilots for all relevant purposes other than pay and conditions. The aircraft that the Jetconnect pilots fly are Qantas aircraft, in that they bear Qantas livery, have Qantas flight numbers and are leased to Jetconnect by Qantas. [18] It was submitted by AIPA that the Award was intended to apply to pilots engaged to provide short haul Qantas services such as those engaged via Jetconnect. In this regard, it was said that for the purpose of the industrial regulation of pilots, Jetconnect and Qantas are properly to be considered to be a single entity notwithstanding a corporate veil and paper transactions between the companies. Jetconnect is no more than an operating division or business unit of Qantas or alternatively, it effectively performs the role of a labour hire company providing pilots to operate aircraft owned by Qantas on Qantas routes. The Jetconnect operations are therefore to be considered part of Qantas’ short haul operations and the Jetconnect pilots are Qantas pilots. [19] The Australian Council of Trade Unions (ACTU) supported the AIPA application. The ACTU submitted that this case will set a precedent on the extent to which companies can avoid their award entitlements through the use of artificial corporate arrangements and off-shoring. It was also said that Jetconnect is a sham entity and that the Jetconnect pilots are directly employed by Qantas. [20] Qantas and Jetconnect (the respondents) opposed the AIPA application on the basis that Jetconnect is not amenable to the jurisdiction created by the FW Act as it is a company based and domiciled in New Zealand engaging pilots who are domiciled and based in New Zealand and whose duties are primarily performed outside of Australia 1 . [21] The respondents also asserted that there are other jurisdictional deficiencies in AIPA’s application. In particular it was submitted that there is no ambiguity or uncertainty in clause 5 of the Award and that the prerequisites for varying the Award to make Jetconnect a party have not been met. [22] It was also said that the common thread through AIPA’s submissions is the assertion that Jetconnect is not an “independent” subsidiary of Qantas and a separate employing entity. In so asserting, it was submitted that AIPA was attaching significance to factors that are entirely consistent with the parent-subsidiary relationship and the wet lease capacity services contract between Qantas and Jetconnect and overstating the degree of Qantas control over operational and employment matters. It was also submitted that there is no basis in legal principle to ignore that Jetconnect is the relevant employing entity of the pilots. [23] Even if the jurisdictional obstacles in relation to the application could be overcome, it was contended by the respondents that there are a range of discretionary considerations which should lead FWA to refuse to vary the Award to apply to Jetconnect pilots. These include the significant complications that would arise from the Award variation for Jetconnect and its pilots in relation to compliance with aviation and employment laws in New Zealand. Relevant legislative provisions [24] On and after 1 July 2009, despite the repeal of the WR Act, the Award continued in existence as a “transitional instrument” within the meaning of sub-items 2(2)(a) and 2(3)(a) of Part 2 of Schedule 3 to the Transitional Act. [25] Sub-item 9(1) of Part 3 of Schedule 3 to the Transitional Act provides that a transitional instrument cannot be varied except under circumstances referred to in that sub-item. In particular, sub-item 9(1)(a) provides that a transitional instrument cannot be varied except under “a provision of this Part or the regulations.” [26] Item 10 of Part 3 of Schedule 3 to the Transitional Act relevantly provides: “ 10 All kinds of transitional instrument: variation to remove ambiguities etc. (1) On application by a person covered by a transitional instrument, FWA may make a determination varying the instrument: (a) to remove an ambiguity or uncertainty in the instrument; ...” [27] Item 12 of Part 3 of Schedule 3 provides: “ 12 Awards: continued application of WR Act provisions about variation and revocation (1) Subject to this item, Divisions 5 (other than subsections 554(1) to (4)) and 6 of Part 10 of the WR Act continue to apply on and after the WR Act repeal day in relation to transitional instruments that are awards as if references to the Commission were instead references to FWA. Note: Items 10 and 11 apply instead of subsections 554(1) to (4) of the WR Act. (2) FWA must perform its powers and functions under Divisions 5 and 6 in a way that furthers the objects of Part 10 of the WR Act. (3) An award cannot be varied or revoked under Division 5 or 6 after the end of the bridging period, except as follows: (a) an award can be varied after the end of the bridging period under section 553 of the WR Act; (b) an award can be varied or revoked after the end of the bridging period as a result of FWA continuing to deal with a matter that it was dealing with before the end of the bridging period.” [28] The objects of Part 10 of the WR Act are set out in s.510 as follows: “ 510 Objects of Part The objects of this Part are: (a) to ensure that minimum safety net entitlements are protected through a system of enforceable awards maintained by the Commission ; and ... (c) to ensure that the Commission performs its functions under this Part in a way that: (i) encourages the making of agreements between employers and employees at the workplace or enterprise level; and (ii) protects the competitive position of young people in the labour market, promotes youth employment , youth skills and community standards, and assists in reducing youth unemployment.” [29] Section 557 of the WR Act, which continues to apply by virtue of item 12, relevantly provides: “ 557 Binding additional employers, employees and organisations to an award (1) The Commission may make an order varying an award to bind an employer, employee or organisation to the award. Note 1: Item 4 of Schedule 4 to the Workplace Relations Amendment (Work Choices) Act 2005 provides for the employers, employees and organisations bound by awards. Note 2: An award may also be varied to bind eligible entities and employers under Division 7. (2) The Commission may make an order varying an award under subsection (1) only in accordance with this Division.” [30] Section 559 of the WR Act, which also continues to have effect, provides the circumstances in which an application may be made to vary an award to bind an employer or a specified class of employees. It relevantly provides: “ 559 Application to be bound by an award—no agreement between employer and employees (1) An employer, or an employee or employees of an employer, may apply to the Commission for an order varying an award specified in the application to bind the employer and a specified class or specified classes of employees of the employer. ... (3) An employee or employees of an employer may make an application under subsection (1) even if the employer does not support the application. ... (5) The Commission may make an order varying the award as specified in the application only if the Commission is satisfied: (a) that the employer, and the employees of the employer who would be bound by the award, have been unable to make a workplace agreement, despite having made reasonable efforts to do so; and (b) the award is appropriate to govern the terms and conditions of employment of those employees; and (c) the employer is not already bound by an award that regulates the terms and conditions of employment of those employees. (6) An organisation may make an application under subsection (1) on behalf of an employee or employees, and may represent the employee or employees in proceedings relating to the application, if: (a) the employee or employees have requested that the organisation do so; and (b) the organisation is entitled (under its eligibility rules) to represent the interests of the employee or employees ...” [31] Under the Transitional Act, every award under the WR Act only has ongoing operative effect under the FW Act as a “transitional award instrument” from 1 July 2009. Under Schedule 6 to the Transitional Act, a transitional award instrument will cease to have operative effect on 31 December 2013 if not terminated or replaced with a modern enterprise award before then (see sub-item 9(4) of Schedule 6 to the Transitional Act). Issues for consideration [32] There are four main matters relating to jurisdictional or other express statutory requirements raised by the respondents in their opposition to AIPA’s application. These are: (a) there is no ambiguity or uncertainty in clause 5 of the Award (item 10 of Part 3 of Schedule 3 to the Transitional Act); (b) pilots employed by Jetconnect have not requested AIPA to bring the application (item 12 of Part 3 of Schedule 3 to the Transitional Act and s.559 (6)(a) of the WR Act); (c) AIPA is not eligible to represent the industrial interests of pilots engaged by Jetconnect (item 12 of Part 3 of Schedule 3 to the Transitional Act and s.559(b)(6) of the WR Act); and (d) the FW Act, and the WR Act as relevant to this application, do not have application to Jetconnect as it is a New Zealand company employing pilots in New Zealand. [33] The submissions of the respondents also raised issues as to whether other pre-requisites for the exercise of powers under item 12 of Part 3 of Schedule 3 to the Transitional Act and s.559 of the WR Act were satisfied. [34] Central to the issues raised in the proceedings is the question as to the status of Jetconnect. A considerable part of the evidence and submissions was directed to this matter. It is therefore appropriate to consider this before turning to the other issues raised by the respondents. Status of Jetconnect [35] It was submitted by AIPA and the ACTU that Jetconnect is merely operating as a business division or unit within Qantas rather than as an independent subsidiary. On the evidence presented, it was said that Jetconnect has been set up as a division of Qantas rather than a truly independent subsidiary and accordingly Jetconnect’s operations are in fact Qantas short haul operations. Therefore it was said that Jetconnect and Qantas are a single entity for the purposes of the industrial regulation of pilots. [36] AIPA also submitted that the pilots engaged by Jetconnect are, in reality, employed by Qantas notwithstanding a corporate veil and paper transactions between Jetconnect and Qantas. It was said that Jetconnect is an agent for Qantas in the manner set out in Australian Liquor, Hospitality and Miscellaneous Workers Union, Western Australian Branch v Burswood Catering and Entertainment Pty Ltd 2 (Burswood) and Spreag v Paeson Pty Ltd 3 or, in the alternative, that the arrangements between Jetconnect and Qantas are a sham (insofar as they concern the industrial regulation of pilots). In this regard, reference was made to the decision of the Western Australian Industrial Relations Commission in Court Session in Burswood where it is stated: “Where it is contended that the setting up and conduct of a company is an abuse of the privilege of incorporation a Court or Tribunal may ignore the corporate structure. However, there are few Australian cases where the veil has been lifted. Courts and tribunals are reluctant to lift the corporate veil and do so in three circumstances: a) When a particular law requires it to be done; b) When it can be established that the company is an agent of its controllers; c) When the Court is satisfied the company has been created as “mere facade” or “sham” to conceal the true facts.” 4 [37] It was also submitted by AIPA that, if Jetconnect is found to be a truly independent subsidiary, the operating agreements between Qantas and Jetconnect demonstrate that Jetconnect performs the role of a labour hire company engaged to provide personnel to manage and operate aircraft owned by Qantas on routes owned by Qantas. In these circumstances, it was contended that: (a) Jetconnect’s operations are part of Qantas’ short haul operations as considered by the Award; (b) Jetconnect pilots are Qantas pilots for all purposes other than pay and conditions; and (c) the Award was intended to apply to pilots engaged to fly short haul operations operated by a Qantas business unit, regardless of whether that business unit is incorporated such as Jetconnect. [38] The ACTU supported AIPA’s submissions about the status of Jetconnect. The ACTU took the view that Jetconnect is a sham employer and that the true employer of the Jetconnect pilots is Qantas. It was said that the most critical illustration of this is that the Jetconnect employees’ wages are paid directly by Qantas. However, the ACTU submitted that if the sham argument was not correct, Jetconnect is a self-described labour hire firm according to its Annual Report and that pilots engaged by a wholly-owned labour in-sourcing company such as Jetconnect would come within the meaning of a person “employed by Qantas” in clause 5 of the Award. This interpretation would give effect to the purpose of the Award, which is to ensure that Qantas adheres to appropriate minimum labour standards. [39] The respondents did not dispute that Qantas exercises considerable control over group strategic matters, routes and resource allocation or that Jetconnect does not have its own brand or source of customer revenue. However it was said that AIPA’s contentions regarding the relative lack of independence of Jetconnect overstated the degree of Qantas’ control over operational matters and failed to recognise that many aspects of the operational and financial arrangements between Qantas and Jetconnect are entirely consistent with a normal parent-subsidiary relationship and a wet lease capacity contract in the airline industry, particularly given that the parent is the brand and the marketer of flights to the public. [40] In any event it was submitted by the respondents that FWA could not ignore Jetconnect as a separate employing entity based on some notion that Jetconnect is not truly an “independent subsidiary”. It was said that on a proper construction of the Award, the intention of the award-maker at all relevant times has been that the employer respondent is Qantas, as opposed to subsidiaries, regardless of whether or not a subsidiary company could be said to be “truly independent”. [41] The respondents also contended that AIPA’s submissions were not supported by the authorities on lifting the corporate veil. In this regard, it was said that in the main cases relied upon by AIPA 5 the finding was made to pierce the corporate veil based on an implied agency. This is a quite distinct basis from the concept of a “sham” which was also relied upon by AIPA. It was submitted that for the “sham” argument to succeed, it must be shown that the parties have the common intention that the document or act is a disguise for something else and is not creating the legal rights and obligations which it appears to create. 6 This could not be satisfied in relation to the Operating Agreements or arrangements between Qantas and Jetconnect or in relation to the employment contracts between Jetconnect and its pilots. [42] In relation to the AIPA submissions based on the concept of an implied agency between Qantas as the parent company and its subsidiary Jetconnect, it was said that the critical flaw in the argument is that there is nothing to support a conclusion that in entering contracts of employment with Jetconnect pilots, Jetconnect was expressly or implicitly authorised to bind Qantas to a relationship of employment with those pilots. The express terms in the Operating Agreements and in the Jetconnect employment documentation are contrary to this. [43] In any event it was submitted by the respondents that the basic principle of corporate legal personality and the separation between the legal identities of a parent company and its subsidiary cannot be disregarded in the present matter. 7 In this regard, reference was made to the decision of the English Court of Appeal in Adams v Cape Industries Plc 8 , where it is stated that: “To the layman at least the distinction between the case where the company itself trades in a foreign country and the case where it trades in a foreign country through a subsidiary, whose activities it has full power to control, may seem a slender one. ... save in cases which turn on the wording of particular statutes or contracts, the court is not free to disregard the principle of Salomon v A Salomon & Co Ltd [1987] A.C. 22 merely because it considers that justice so requires. Our law, for better or worse, recognises the creation of subsidiary companies, which though in one sense the creatures of their parent companies, will nevertheless under the general law fall to be treated as separate legal entities with all the legal rights and liabilities which would normally attach to separate legal entities.” [44] It was also contended by the respondents that the decision in Burswood is of little assistance in the present matter as the facts and the nature of the question to be determined in that case are distinguishable. In particular Burswood was concerned with the application of the State wage fixing principles and relevant provisions of the Industrial Relations Act 1979 (WA) in the context of an application for the making of a new award for catering employees. [45] It is not necessary in this decision to repeat all the evidence presented regarding the relationship between Qantas and Jetconnect and the operation of Jetconnect, including the employment of pilots. The evidence demonstrates that Qantas exercises a very high degree of control over its subsidiary. This is clear from: the management structure of Jetconnect; the terms of the collective agreement between Jetconnect and NZALPA which states in clause 4.1.1 that: “Jetconnect is a wholly-owned subsidiary of Qantas and consequently may have little or no control over factors affecting its operations”; material filed by Qantas and Jetconnect in New Zealand Employment Court proceedings to the effect that Qantas and not Jetconnect determines major decisions as to Jetconnect’s operations; and the evidence of senior Jetconnect managers regarding major expenditure and banking arrangements. [46] In regard to the financial arrangements between Qantas and Jetconnect, the evidence included that Jetconnect has no bank accounts and that all of its expenditure is paid directly by Qantas, including wages paid to employees. Qantas allocates a budget for Jetconnect’s operations which Jetconnect cannot exceed without permission from Qantas. The terms of the service arrangements between Qantas and Jetconnect are determined by Qantas, with each service agreement being a “cost-plus” agreement. [47] It is also clear that the trans Tasman operations of Jetconnect are closely integrated with Qantas’ services in that: Qantas is responsible for marketing and tickets; the aircraft used by Jetconnect bear Qantas livery; the Jetconnect services are operated for and on behalf of Qantas and have Qantas flight numbers; the Jetconnect pilots are trained by Qantas; and the operating procedures between Qantas and Jetconnect are essentially the same. [48] On the other hand, it is noted that: Jetconnect is a subsidiary company incorporated and operating under the laws of New Zealand; Jetconnect’s offices and management are based in New Zealand; Jetconnect was established in 2001 and provided cabin crew to various Qantas operations (both long haul and in the domestic New Zealand market); In 2002, Jetconnect began to operate passenger services on behalf of Qantas on domestic New Zealand routes; Jetconnect has its own processes for the recruitment of staff and has entered into contracts of employment with pilots and other workers under New Zealand employment laws; Jetconnect has negotiated with NZALPA and is party to a collective employment agreement for its pilots; and Jetconnect holds an AOC from the New Zealand civil aviation authorities. [49] It is clear therefore that Jetconnect is a legal entity and a separate employing entity for the purposes of New Zealand laws, even though it is a subsidiary of Qantas and is subject to a considerable degree of control by its parent. [50] The submissions of AIPA and ACTU invite us to disregard this status of Jetconnect by lifting the corporate veil and recognising that Jetconnect’s pilots are in reality employed by Qantas and its operations are in fact Qantas short haul operations for the purposes of the Award. This would be relevant in relation to the consideration of the jurisdictional and technical arguments raised by the respondents and also to the discretionary factors to be considered in determining whether the variations to the Award sought by AIPA should be made. In particular, in relation to the jurisdictional and technical issues raised concerning AIPA’s application, it is relevant in determining whether the Jetconnect pilots are “employed by Qantas” for the purposes of clause 5 of the Award and the eligibility rules of AIPA. These matters will not, however, be wholly determined according to the decision taken in regard to the lifting of the corporate veil. The history and proper construction of the Award provision and AIPA’s eligibility rules must also be taken into account. [51] For the purposes of this decision, what was put by the Western Australian Industrial Relations Commission in Burswood as to the circumstances in which courts and tribunals might lift the corporate veil can be accepted. However it is recognised that there have been reservations expressed about the correctness of the authorities relied upon in that case. 9 Further it is recognised that the factual circumstances before us are distinguishable from those in Burswood and cases like Damevski v Giudice 10 where an employment relationship was found to exist with a former employer notwithstanding that the employee provided services to the former employer through a contracting agency. In the present case, the employees concerned have never been Qantas employees - from the beginning of their employment with Jetconnect they have always been party to employment contracts with that company. Those pilots who have earlier been employed by Qantas have applied for positions with Jetconnect, been selected and moved to New Zealand to take up the appointment. The present case is also distinguishable from Spreag v Paeson Pty Ltd 11 where the issue was whether an overseas parent company was carrying on business in Australia (in the context of Part V of the Trade Practices Act ) such that it could be held liable for the misleading conduct of its subsidiary. [52] For the corporate veil to be lifted in the present case, it must be shown that Jetconnect was acting as an agent of Qantas or that Jetconnect has been created or was operating as a sham. On the evidence presented, it has not been established that Jetconnect was acting as an agent of Qantas in entering into the New Zealand collective employment agreement with NZALPA or in employing pilots under the terms of that agreement or individual employment contracts. There is no evidence to the effect that Jetconnect was entering into contracts of employment with pilots as an agent of Qantas or that Jetconnect was either expressly or implicitly authorised to bind Qantas to such an employment relationship with pilots. The employment contracts are between Jetconnect which is a corporate legal entity under New Zealand law and pilots who are resident in New Zealand and were being employed pursuant to New Zealand employment laws. There was no intention for any party other than Jetconnect to enter such contracts with the pilots. [53] The argument based on the arrangements between Qantas and Jetconnect being a “sham” so as to conceal the true facts must also be rejected. In this regard, care must be taken to distinguish between what might in industrial parlance be described as a “sham” arrangement and what might on the basis of the relevant authorities be held to be a sham justifying piercing the corporate veil. [54] In our view, the Operating Agreements between Qantas and Jetconnect and the employment contracts entered into between Jetconnect and its pilots cannot be held to be shams. Even though Qantas exercises a considerable degree of control and influence over the operation of its subsidiary, this is not sufficient to disregard the separate legal personality of the subsidiary. For this to be done, it would need to be shown that there is a mere sham or facade in which the company is playing a role or that the creation or use of the company was designed to enable a fiduciary obligation to be evaded or a fraud to be perpetrated. 12 [55] In Equuscorp Pty Ltd v Glengallan Investments Pty Ltd 13 the High Court said: “ ‘Sham’ is an expression which has a well-understood legal meaning. It refers to steps which take the form of a legally effective transaction but which the parties intend should not have the apparent, or any, legal consequences ( Sharrment Pty Ltd v Official Trustee in Bankruptcy [1988] FCA 179 ; (1988) 18 FCR 449). ” 14 [56] In Department of Justice v Lunn 15 a Full Bench of the Australian Industrial Relations Commission, after referring to relevant passages in the decisions in Sharrment 16 and Equuscorp 17 , said: “The judgments in Sharrment demonstrate that it is often a difficult matter to establish that a document that gives the appearance of creating binding legal relations is a sham.” 18 [57] On the evidence in this case, it cannot be concluded that the Operating Agreements and arrangements between Qantas and Jetconnect are a sham. The Agreements established Jetconnect as a wet lease operator of trans Tasman services for and on behalf of Qantas. They involved Jetconnect in maintaining and complying with its AOC, operating and maintaining aircraft and providing pilots and cabin crew for such services. The obligations of Qantas included the provision of aircraft to Jetconnect, the payment of fees and expenses and providing routes for Jetconnect to fly. Indeed on the evidence in this case the Operating Agreements have been implemented by the parties. [58] Similar comments could be made in regard to the employment contracts between Jetconnect and its pilots. There is no evidence that Jetconnect or its pilots did not intend to give legal effect to the arrangements established in the employment contracts. [59] It was submitted by AIPA that the arrangements between Qantas and Jetconnect and between Jetconnect and its pilots were artificial and entered into in order to avoid Australian industrial regulation. It was also submitted that Jetconnect is akin to a labour hire company providing personnel for Qantas operations. When the history of Jetconnect is considered, the reasons for its establishment included the provision of domestic passenger services in New Zealand and from September 2003 the operation of some trans Tasman services. It is also clear from the evidence that Jetconnect is more than a labour hire company, having an AOC and operating and maintaining aircraft. There is no doubt that the arrangements established around 2003 between Qantas and Jetconnect have been continued and expanded to take advantage of the lower cost base of Jetconnect’s operations partly due to its recruitment of New Zealand-based pilots. This might be a consideration going to the merits of granting the AIPA application in the present matter. However it does not provide a basis, according to the authorities cited, for finding that the relevant arrangements between Qantas, Jetconnect and its pilots are to be treated as a sham and therefore to warrant looking behind the corporate veil and determining that the Jetconnect pilots are employees of Qantas. [60] It may be that Qantas and Jetconnect are conducting a common enterprise. However this would not of itself be a sufficient basis for lifting the corporate veil. In our view Jetconnect has not abandoned its corporate/commercial existence to the extent that would warrant a finding that Qantas was the employer of the Jetconnect pilots. 19 [61] We would add that within the statutory charter of FWA (including that established by s.110 and s.111 of the WR Act) it is permissible to examine the real affairs for the purpose of exercising jurisdiction. This may mean that even where the corporate veil is not lifted to the extent that the subsidiary is effectively ignored as a legal entity, the reality of the circumstances may be taken into account. Accordingly, although we recognise Jetconnect as the legal employing entity for present purposes, the nature and degree of control and the form of corporate arrangement might be relevant to other issues raised by the AIPA application. [62] We now turn to consider the jurisdictional and preliminary objections to AIPA’s application. Item 10 - Application to vary Award to remove ambiguity or uncertainty [63] Clause 5 of the Award provides as follows: “ 5. PARTIES BOUND This award is binding upon Qantas Airways Limited (the Company) and the Australian and International Pilots Association (the Association) in respect of pilots, whether members of the Association or not, employed by the Company in operations known as Qantas short haul operations.” [64] AIPA submitted that the Award applies to pilots who are “employed ... in operations known as Qantas short haul operations” and that this includes operations where the purported legal employer of the pilots is a wholly-owned subsidiary that is in fact no more than an operating division of Qantas. It was said that the Award is clearly intended to apply to pilots engaged on short haul operations that are operated by Qantas, in the sense of being managed by and under the control of Qantas, and which are flown as ‘Qantas’ flights, with pilots who wear Qantas uniforms and comply with Qantas procedures. [65] It was submitted by AIPA that the ambiguity or uncertainty in the clause arises by the use of two different corporations which are both “the Company” for the purpose of the Award. It was therefore submitted by AIPA that the ambiguity or uncertainty in relation to the coverage of Jetconnect pilots should be removed by a variation to make clear that the Award applies in respect of the trans Tasman operations that Jetconnect conducts for and on behalf of Qantas. [66] AIPA contended that the Award should not be interpreted in a manner that would render it possible to engage pilots on sub-standard conditions merely by the device of interposing a wholly-owned subsidiary company as the purported employer, especially where the subsidiary company is merely an operating division of the parent rather than a truly independent subsidiary. It was said that the Award should be interpreted in a beneficial manner to apply to any pilot employed by Qantas, whether directly or via a wholly-owned subsidiary, to work in operations known as Qantas short haul operations. It was said that the Award was intended to apply to pilots employed via Jetconnect and should be varied accordingly. [67] The respondents submitted that the words of clause 5 of the Award make it clear that the employer bound by the Award is Qantas. The effect of AIPA’s submissions is to ignore the words “employed by the Company” in the clause. It is also clear that, having regard to the history and context of the Award, it was not intended to apply to Jetconnect. Looking at the other provisions of the Award, there is nothing that indicates that the Award was to bind Jetconnect or subsidiaries of Qantas generally. It was also said that the history of the Award, as well as the transitional provisions that have taken effect at various times since it was made in 1996, confirm that the relevant pilots covered are those employed by Qantas and that the only employer bound by the Award is Qantas, not other subsidiary entities. [68] In support of their submissions, the respondents referred to the award history, which includes: • A finding made on 13 March 1996 of a dispute between Qantas, Australian Airlines Limited and AIPA [Print N2182] which led to the making of an award in settlement of the dispute called the Qantas Short Haul Pilots’ Award 1996 [Print N0358]; • the 1996 award was renamed the Qantas Short Haul Pilots (Interim) Award, 1999 in the course of the award simplification process in 1999, with Qantas as the sole employer respondent (Australian Airlines having merged with Qantas); and • in 2006, following the commencement of the relevant parts of the Workplace Relations Amendment (Work Choices) Act 2005 (the WR Amendment Act), the award was taken to be replaced by a “pre-reform award” in the same terms as the original award and binding on each employer that was bound immediately before the reform commencement. 20 [69] At the time of the making of the various short haul awards and at all relevant times since, it was submitted that Qantas and many other companies in Australia have operated through subsidiary companies and that such subsidiary companies are recognised at law as legal entities and employers in their own right. It was also said that wet lease capacity arrangements were an established method of an airline such as Qantas being provided with flight crew or aircraft or both and that this did not mean that flight crew became the employees of the airline making use of a wet lease arrangement. [70] Accordingly it was submitted that there is no reason to impute to the award-maker any intention that the Award was meant to apply to a subsidiary of Qantas that employed pilots. [71] Further it was said that over the course of the past decade, Jetconnect as a wholly-owned subsidiary of Qantas has grown into a substantial operation and a very significant employer of pilots, cabin crew and other persons in New Zealand. Jetconnect has been operating trans Tasman routes on behalf of Qantas since September 2003, employing pilots directly under New Zealand law. Throughout this time, AIPA never suggested, in enterprise bargaining negotiations with Qantas for a short haul or long haul operations or in other matters (e.g. the 2007 AIPA Rules cases 21 ), that Jetconnect pilots were, in reality, employed by Qantas. [72] Having regard to the submissions of the parties, the main question for consideration is whether there is an “ambiguity or uncertainty” in the Award such as to provide a basis for its variation pursuant to item 10 of Part 3 of Schedule 3 to the Transitional Act. [73] The general principles governing the construction of contracts have been applied to the construction of industrial instruments. 22 In Codelfa Construction Pty Ltd v State Rail Authority of N.S.W 23 the High Court considered the widely accepted principles for resolving ambiguity in contracts. In that case Mason J (with whom Stephen and Wilson JJ agreed) stated the rule as follows: “The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.” 24 [74] In the present case, the starting point is essentially a question of construction: to determine whether the clause has a plain meaning or contains an ambiguity. This involves a consideration of the intent - objectively ascertained - of the award-maker. 25 It is a consideration of what is the proper meaning of the clause as distinct from the making of a judgment as a matter of arbitral discretion as to what the clause should provide. [75] As Madgwick J said in Kucks v CSR Limited 26 : “It is trite that narrow or pedantic approaches to the interpretation of an award are misplaced. The search is for the meaning intended by the framer(s) of the document, bearing in mind that such framer(s) were likely of a practical bent of mind: they may well have been more concerned with expressing an intention in ways likely to have been understood in the context of the relevant industry and industrial relations environment than with legal niceties or jargon. ... But the task remains one of interpreting a document produced by another or others. A court is not free to give effect to some anteriorly derived notion of what would be fair or just, regardless of what has been written into the award. Deciding what an existing award means is a process quite different from deciding, as an arbitral body does, what might fairly be put into an award. So, for example, ordinary or well-understood words are in general to be accorded their ordinary or usual meaning.” 27 [76] The industrial purpose of an award provision is a relevant consideration in construing its meaning. However as was observed by Jessup J in Chief Commissioner of Police v Kerley 28 : “Care must ... be taken not to perceive a particular industrial purpose in a combination of contemporary circumstances that differs from those obtaining when the words were written. I also consider that, generally, the words used by the award maker should be the starting point for the ascertainment of his or her purpose.” 29 [77] In our view, the words and intent of clause 5 of the Award are clear. The words of the clause make it clear that the employer bound by the Award is Qantas, “the Company”, and that it is binding upon Qantas in respect of pilots “employed by the Company in operations known as Qantas short haul operations.” There is nothing in the wording of the clause indicating that the award-maker intended the Award to cover subsidiary companies of Qantas or that the parties to the Award saw the Award or its predecessors as applying to subsidiaries or to an operation such as that of Jetconnect. It is not sufficient for a party simply to assert that an award provision has a particular meaning or application and then to rely upon such assertion as establishing that there is uncertainty or ambiguity in the provision. The meaning of the provision and the existence of an ambiguity must be objectively ascertained. [78] It is also relevant in the construction exercise to consider the history of the Award and the full context of the award clause. 30 This includes the context of the clause in the Award and the context within which the Award was made including the relevant statutory provisions. Such a consideration confirms the conclusion reached regarding the meaning of the words of the clause. It has not been demonstrated that there is anything in the other provisions of the Award which indicates that the Award was intended to bind Jetconnect or to apply to pilots employed by Jetconnect. Further the legislative environment in which the 1996 award was made required that there be a finding of an industrial dispute between the relevant employees and one or more identified employer or an employer association. The award made in settlement of that dispute would only be binding upon those parties, although an application could be made to the Australian Industrial Relations Commission by a registered organisation of employees to “rope in” a new employer. Such a roping-in application could have been made up to 2006, when the WR Amendment Act took effect. The only employer party to the dispute which lead to the making of the Award and which continued to be bound by the Award was Qantas. [79] It was submitted by AIPA and ACTU that Jetconnect is a mere business unit of Qantas with little or no control over its own operations and therefore that the Jetconnect pilots should be treated for the purposes of the Award as being employed by Qantas. As stated earlier in this decision, it is recognised that Qantas exercises a considerable degree of control over its subsidiary company. Whilst it is arguable that this is relevant to the question of the nature of the airline operations concerned, this does not mean that New Zealand-based pilots employed by Jetconnect can be taken for the purposes of the Award to be employed by Qantas. The employment contracts of these pilots are with Jetconnect which, as the employing entity, is incorporated in New Zealand, operates under an Aircraft Operators Certificate issued by the CAANZ and employs pilots under the terms of a collective agreement negotiated with NZALPA or under individual agreements made under New Zealand employment laws. [80] For these reasons, there is no ambiguity or uncertainty in clause 5 of the Award and therefore the requirements of item 10 of Part 3 of Schedule 3 to the Transitional Act are not met in relation to the application by AIPA. Accordingly there is no basis on which to vary clause 5 of the Award pursuant to item 10 so as to cover the trans Tasman operations of Jetconnect. Item 12 - Application to add Jetconnect as a respondent to the Award [81] The application by AIPA to add Jetconnect as a respondent to the Award is made pursuant to item 12 of Part 3 of Schedule 3 to the Transitional Act. This item provides rules about variation and termination that apply to all transitional instruments. The effect is that an award which is a transitional instrument may be varied to bind additional employers, employees or organisations provided that the requirements of ss.557 and 559 of the WR Act are met. An award cannot be so varied after the end of the bridging period, which is 31 December 2009, except as a result of FWA continuing to deal with a matter that it was then dealing with (see item 12(3)(b)). The application by AIPA to vary the Award was made on 21 December 2009 and therefore meets this requirement. [82] Section 559 of the WR Act requires an application by an employer or by “an employee or employees of an employer” for an order varying an award to bind the employer and a specified class of employees of the employer. 31 Subsection 559(6) allows an organisation to make an application “on behalf of an employee or employees” and to “represent the employee or employees in proceedings relating to the application” provided two requirements are met: (a) the employee or employees have requested that the organisation do so; and (b) the organisation is entitled under its eligibility rules to represent the interests of the employee or employees. [83] We now turn to consider these matters. (a) Request by employee or employees of Jetconnect [84] AIPA submitted that the requirement in s.559(6)(a) is satisfied in that Jetconnect pilots requested that the current proceedings be brought. In this regard, AIPA relied upon the following evidence. [85] The secretary of AIPA, Mr Steven Anderson, in a statement made on 3 December 2010, stated that: “I have spoken to many Jetconnect pilots on numerous occasions throughout 2009, before we commenced these proceedings and during 2010. Many of those pilots told me that they believed that the level they were paid at was unfair, and requested that AIPA take steps trying to improve their situation. They told me that they believed that, given they were flying Australia[n] aircraft to and from Australia for an Australian airline, they should be paid the same as Australian pilots who were performing the same role.” [86] Mr Anderson also referred to the decision of the AIPA executive on 3 November 2009 to seek to have Jetconnect pilots covered by the Award. [87] Both Mr Fred Vernon and Mr Stephen Fyfe, who were employed as Jetconnect pilots, gave evidence that they believe Jetconnect pilots should have the same conditions as mainline Qantas pilots. Mr Vernon was employed as a pilot by Jetconnect for a period of about two years from May 2008 until June 2010. Mr Fyfe has been employed by Qantas since July 2008. Between February 2010 and February 2011 he was on leave without pay from Qantas and employed as a pilot by Jetconnect. Mr Fyfe is a member of AIPA and during his employment with Jetconnect was an associate member of that organisation. He did not become a member of NZALPA. In a statement made on 6 December 2010, Mr Fyfe states: “Prior to applying for a position at Jetconnect I discussed with AIPA that it was my view that the work being undertaken by Jetconnect was the same work as what was being undertaken by Qantas mainline pilots on the same aircraft with Qantas flight numbers. We discussed that Jetconnect appeared to me to be the same company, Qantas. I said that it was my view that the work should be undertaken by the one cohesive pilot group on the same terms and conditions. This is a view that I still maintain today.” [88] The respondents submitted that there was no evidence before FWA to permit a finding that AIPA made the application under item 12 at the request of any pilot employed by Jetconnect. It was said that this issue was raised before the AIPA witnesses were called to give evidence so that AIPA was aware of the alleged defect in relation to its application. It was contended that nowhere in his evidence does Mr Vernon suggest that he or any other Jetconnect pilot requested AIPA to bring the application. Mr Fyfe did not say that he requested AIPA to make the application and, in any event, he was not an employee of Jetconnect when the application was lodged in December 2009. Nowhere in Mr Anderson’s evidence does he say that a Jetconnect pilot requested AIPA to make any application to make Jetconnect bound by the Award. Mr Anderson was a committee member of AIPA in the period November 2008 to November 2009 and became the secretary of AIPA in November 2009. It would seem from the cross-examination of Mr Anderson that the conversations with Jetconnect pilots referred to above took place in September 2010 and that he had no personal knowledge of what was discussed between other AIPA representatives and Jetconnect pilots in 2009. [89] The requirements of s.559(6) of the WR Act are clear. An organisation can only make an application to vary an award to bind an employer where employees of that employer have requested the organisation to do so. In the present case, AIPA must have been requested by a pilot or pilots employed by Jetconnect to make the application to bind Jetconnect to the Award in respect of its employed pilots. [90] There was no direct evidence presented in the proceedings before us as to such a request having been made. The issue was clearly raised in submissions filed by the respondents before the AIPA witnesses were called to give evidence. However AIPA did not produce any document recording a written request by a Jetconnect pilot to bring the application or present other persuasive evidence to the effect that the necessary request had been made. [91] It is possible that Jetconnect pilots would have reservations about making such a request. The evidence of Mr Anderson, the secretary of AIPA, went to the concerns of AIPA which led to the making of the present application. These concerns were triggered mainly by the decisions of Qantas in 2009 to have Jetconnect take over more of the Qantas short haul operations between Australia and New Zealand. This meant the loss of a substantial number of Qantas Mainline flights, being Qantas flights operated by Qantas employed pilots. In his statement of 31 January 2011, Mr Anderson says that “(t)his has been a matter of continuing and increasing concern to AIPA members employed by Qantas who see it as part of a strategy to off-shore jobs at lower rates of pay” and that “(t)hese concerns led to the executive of AIPA determining in late 2009 to commence these proceedings.” In his earlier statement of 3 December 2010 Mr Anderson refers to AIPA’s concern in relation to the Jetconnect operation as multifaceted in that it reduces wages for Qantas short haul and long haul pilots, reduces promotional opportunities for Qantas short haul pilots and undermines the capacity of AIPA to bargain for its Qantas members. In addition to the concern for its Qantas mainline employed pilots, Mr Anderson said that AIPA has a genuine and ongoing concern in relation to Jetconnect pilots in that they are being paid below what they ought to be entitled to under the Qantas short haul award. [92] Despite the expressed concern about the position of Jetconnect pilots, it would seem that the primary concern of AIPA in making the application was to protect the position of Qantas employed pilots by ensuring that all pilots employed on Qantas services, whether employed in Australia or New Zealand, were covered by the Award. This would not result in Jetconnect pilots receiving the same pay and conditions as Qantas short haul pilots, the latter being covered by an enterprise bargaining agreement which replaces the Award. 32 However it would have an impact on the wages and conditions of Jetconnect pilots and the cost of Jetconnect operations. [93] This is not to say that the abovementioned matters are not genuine concerns held by AIPA and its members or that the approach in addressing these concerns by making the present application is not reasonable or legitimate on the part of AIPA. However it is understandable that there might be reservations on the part of Jetconnect pilots about the pursuit of an application by AIPA to bind their employer to the Award. [94] The majority of Jetconnect pilots are members of NZALPA and covered by the Jetconnect Collective Employment Agreement. There was evidence that AIPA had an agreement with NZALPA to leave the industrial representation of Jetconnect pilots to NZALPA. The Jetconnect pilots might seek through their representation by NZALPA to improve their pay and conditions through negotiations for a new collective agreement. This could have been clarified in the proceedings but no direct evidence was led by the parties as to the position of NZALPA or Jetconnect pilots relating to the AIPA application and any request from relevant employees for the making of the application. [95] However this might be, the evidence in the present matter does not establish that there was at the relevant time a request by any Jetconnect pilot in relation to AIPA making the application. It is a requirement under s.559(6)(a) of the WR Act that there be such a request. This requirement is not satisfied in relation to the AIPA application. (b) AIPA coverage of Jetconnect pilots [96] AIPA submitted that the requirement in s.559(6)(b) of the WR Act was satisfied as it is entitled under its eligibility rules to represent the interests of Jetconnect pilots. [97] Clause 4 of AIPA’s rules deals with eligibility for membership. The relevant parts of rule 4 are as follows: “ 4 - ELIGIBILITY FOR MEMBERSHIP Any person who is normally employed as a pilot or flight engineer on regular public transport airline services extending beyond the Commonwealth of Australia or (except in case of flight engineers) within the Commonwealth of Australia operated by an Australian airline principally engaged in providing international regular public transport airline services or by Australian Airlines Limited shall be eligible for membership in the Organisation. Without in any way limiting the generality of any other provision of this rule or being limited thereby, all persons who are normally employed as pilots on airline services within or extending beyond the Commonwealth of Australia operated in whole or part and under any name by any of: (i) Qantas Airways Limited ABN 16 009 661 901; (ii) Qantas Limited ABN 73 003 613 465; (iii) Australian Airlines Limited ABN 85 099 625 304; (iv) Jetstar Airways Pty Limited ABN 33 069 720 243; (v) Eastern Australia Airlines Pty Limited ABN 77 001 599 024; or (vi) Sunstate Airlines (Qld) Pty Limited ABN 82 009 734 703; shall be eligible for membership in the Organisation ...” [98] It was submitted by AIPA that, if Jetconnect is no more than an operating division of Qantas, it cannot be seriously argued that Jetconnect pilots are ineligible to be members of AIPA. If on the other hand Jetconnect is found to be independent of Qantas, then it was contended that AIPA has eligibility to have as members pilots “ normally employed as pilots on airline services within or extending beyond the Commonwealth of Australia operated in whole or in part and under any name by ... Qantas Airways Limited” . It was said that rule 4 does not require that the pilots be employed by Qantas, only that they be employed pilots working on airline services operated by Qantas. [99] The respondents submitted that AIPA is not entitled under its eligibility rules to represent the industrial interests of persons employed as pilots by Jetconnect. In relation to the first paragraph of rule 4, it was contended by the respondents that even if Jetconnect pilots are persons normally employed as pilots... on regular transport airline services extending beyond the Commonwealth of Australia , it could not be said that the services were operated by an Australian airline. In this regard reference was made to the decisions in Re Application by the Australian and International Pilots Association (the AIPA rules case) 33 . In these decisions it was said that Kaufman SDP and the Full Bench of the Australian Industrial Relations Commission on appeal did not construe the expression operated by an Australian airline in the first paragraph of rule 4 as meaning all airline services operated by any subsidiary within the Qantas Group. It was also said that in deciding to insert the second paragraph into rule 4, the Full Bench determined the eligibility issue between AIPA, Qantas and its subsidiary airlines and in particular that the eligibility rule would not apply to pilots employed by Jetconnect on services operated by Jetconnect. [100] It was also submitted by the respondents that the construction of the rules of AIPA necessarily assumes that the employees referred to can be covered by the WR Act or the FW Act. In this regard, it was contended that AIPA cannot cover employees resident in New Zealand and employed by a New Zealand company. [101] On balance we consider that AIPA is not entitled to represent the interests of Jetconnect pilots. This conclusion follows from the construction of the eligibility rules as informed by the decisions of the Australian Industrial Relations Commission associated with the making of those rules and from the findings in relation to Jetconnect and the trans Tasman services it operates. [102] Jetconnect is a wholly owned subsidiary of Qantas and is incorporated in New Zealand. The pilots employed by Jetconnect are based in New Zealand, as is its management. Jetconnect now operates about 154 trans Tasman flights per week. These services are operated by Jetconnect for and on behalf of Qantas. The aircraft on these services are leased to Jetconnect by Qantas and are operated by Jetconnect under its own New Zealand AOC. In these circumstances it may be concluded that the relevant airline services are not operated by an Australian airline within the meaning of the expression in the first paragraph of rule 4. However we accept that the nature of the relationship between Qantas and Jetconnect means that there are other elements which would support the notion that the trans Tasman services on which the Jetconnect pilots are employed are in effect services “operated by an Australian airline. In this regard, we note that this notion was rejected by Kaufman SDP in the AIPA rules case . 34 [103] The second paragraph of rule 4 was added by the decision of the Full Bench in the AIPA rules case . In granting its consent to the alteration to the eligibility rules of AIPA, the Full Bench determined the eligibility question between AIPA, Qantas and its subsidiary airlines. The Full Bench refused its consent to the alteration of the eligibility rules in so far as it concerned Jetconnect. 35 The Full Bench said “Jetconnect Ltd is incorporated in New Zealand and all its pilots are based in New Zealand and eligible to be members of the New Zealand Air Line Pilots Association Industrial Union of Workers, which is registered under the Employee Relations Act 2000 (NZ). In those circumstances, we do not believe it is appropriate that we consent to its inclusion in the AIPA’s eligibility rules.” 36 [104] The second paragraph of the AIPA eligibility rule must be read in the context of the decision of the Full Bench which consented to the extension of the coverage of AIPA so as to include pilots employed by a number of subsidiary companies in the Qantas Group. Jetconnect is not one of the companies listed in the paragraph. [105] It is therefore doubtful that the requirements of s.559(6)(b) of the WR Act are satisfied in relation to the application by AIPA. We should not however be taken to suggest that the AIPA eligibility rule could not be revisited in light of the present circumstances. Other jurisdictional etc. issues [106] The respondents made other jurisdictional and preliminary objections to AIPA’s application. These related to the extra-territorial operation of the relevant legislative provisions so as to apply to Jetconnect pilots and the requirements of s.559(5) of the WR Act. [107] In our view, it is doubtful that the relevant provisions of the WR Act apply in relation to Jetconnect pilots. The Transitional Act has no provision of general application that indicates an intention to extend the reach of the transitional provisions beyond the geographical limits of Australia. However the Transitional Act does provide for the continued application of certain provisions of the WR Act. 37 The extraterritorial extension of Part 10 of the WR Act, which includes ss.557 and 559, is dealt with in s.512. The section provides inter alia that Part 10 extends to an employee who “is in Australia’s exclusive economic zone” and who is an employee of an “Australian employer”. 38 [108] It is questionable whether the Jetconnect pilots would be regarded, for the purposes of s.512(2), as being “in” Australia’s exclusive economic zone merely because they fly over that area on the way to or from Australian airports and sometimes stay over in Australia before returning to their home port. 39 The Jetconnect pilots reside in and are based in New Zealand and their employment is subject to New Zealand employment laws. It is also questionable as to whether Jetconnect would be regarded, for the purposes of the WR Act, and for reasons previously given, as being an Australian employer. It is a New Zealand registered company with its head office and management based in Auckland. Although there was extensive evidence and argument in the present proceedings regarding the relationship between Qantas and its subsidiary company, in our view this does not satisfy the requirement in paragraph (f) of the definition of “Australian employer” in s.4(1) of the WR Act that it is relevantly carrying on business in Australia. [109] However, even if the relevant provisions of the WR Act do cover Jetconnect and its pilots, we are not satisfied that the requirements of s.559(5) of the WR Act have been met in relation to AIPA’s application. FWA can only make an order varying the Award to bind an employer if it is satisfied that these requirements are also met. [110] Paragraph 559(5)(a) requires that FWA be satisfied that Jetconnect and its employees “have been unable to make a workplace agreement, despite having made reasonable efforts to do so”. The evidence before us was that by letter dated 15 December 2009 addressed to the Chief Executive Officer of Qantas, AIPA sought “to negotiate an Australian Jetconnect collective enterprise agreement.” The letter refers to the corporate arrangements between Qantas and Jetconnect, the trans Tasman services and the Jetconnect pilots being paid New Zealand wages and conditions that are inferior to their Australian counterparts. The letter says that: “.. pilots are extremely disappointed that Qantas is engaging in operations aimed at eroding their pay and conditions and in the process, avoiding paying fair Australian rates of pay. On the basis of the above, AIPA seeks to enter into a collective enterprise agreement as provided for by the Fair Work Act 2009 in order to both protect our member’s pay and conditions and to prevent Qantas from further outsourcing its operations overseas to reduce the job security of our pilots in Australia.” [111] This letter and the associated evidence do not demonstrate that there have been reasonable efforts by AIPA and/or the Jetconnect pilots to make an Australian workplace agreement with Jetconnect. The evidence was that Jetconnect and its pilots are bound either by the collective employment agreement negotiated with NZALPA, or by individual employment agreements, entered into pursuant to New Zealand employment laws. There was no evidence that AIPA’s letter was written at the request of Jetconnect pilots or that those pilots have made any claim or demand on Jetconnect management to make an Australian workplace agreement. In these circumstances, the requirement in s.559(5)(a) that “the employees of the employer who would be bound by the award” have been unable, despite having made reasonable efforts, to make an Australian workplace agreement, is not satisfied. [112] There would also be reservations as to whether the Award is appropriate to cover the terms and conditions of employment of the Jetconnect pilots (see s.559 (5)(b)). In this regard, we note that the pilots who would be covered by the Award are residents of New Zealand and have been employed in that country by a New Zealand company under a collective agreement or individual employment agreements made under New Zealand law. The pilots are members of the NZALPA and that organisation is not, and cannot be, a party to the Award. [113] The fact that the Award concerned is a transitional award that may not continue beyond the transitional period is also a factor, although we note that it may be made into an enterprise award. Of more significance is that as a transitional award, it would not be able to be readily amended to deal with the consequences of having included the New Zealand employees within its coverage. The absence of contemporary rates of pay within the Award is also a consideration and although an application may be made to vary the Australian Fair Pay and Conditions Standard wages that now form part of the Award, this is problematic. 40 Conclusion [114] The AIPA application is to vary the Award so as, in effect, to cover pilots employed by Jetconnect and engaged in trans Tasman services operated for Qantas. For the application to succeed, it must meet the requirements of the Transitional Act and the WR Act which define the scope for the variation of awards which are ‘transitional instruments’. Having carefully considered the relevant legislative provisions and the submissions and evidence presented in the proceedings, and for the reasons given, we are not satisfied that the jurisdictional and other express statutory requirements for making the variations to the Award sought by AIPA have been met. In these circumstances, it is not necessary to consider further the wider issues raised by the AIPA application. Such an exercise would entail consideration of a broad range of matters in deciding, as a matter of arbitral discretion, whether the Award should cover the Jetconnect pilots. [115] For all the reasons given, the requirements set out in items 10 and 12 of Part 3 of Schedule 3 to the Transitional Act and in s.559 of the WR Act have not been met in relation to AIPA’s application. Accordingly the application should be dismissed. DECISION OF SENIOR DEPUTY PRESIDENT DRAKE [116] The primary issue for determination in this application is the status of Jetconnect Limited (Jetconnect). I have read the reasons for decision of Justice Boulton and Commissioner Hampton but, with respect, I am not able to agree with them on this issue. I am not persuaded that His Honour’s and the Commissioner’s conclusion is available on the facts. [117] Justice Boulton and Commissioner Hampton have concluded that the circumstances surrounding this application are relevantly distinguishable from the facts and questions that had to be determined in Australian Liquor, Hospitality and Miscellaneous Workers Union, Western Australian Branch v Burswood Catering and Entertainment Pty Ltd 41 ( Burswood ). I do not agree. The facts of this application are not so different as to materially affect the application of principle. To the extent that the facts of this application are distinguishable from those in Burswood , it is because they are more positively weighted towards the outcome in Burswood . [118] Justice Boulton and Commissioner Hampton have commented on what they refer to as “reservations” expressed in other authorities regarding the correctness of Burswood . For example, in Briggs v James Hardie and Company Pty Ltd & Ors 42 (Briggs) Justice Rogers stated: “The threshold problem arises from the fact there is no common, unifying principle, which underlies the occasional decision of courts to pierce the corporate veil . Although an ad hoc explanation may be offered by a court which so decides, there is no principled approach to be derived from the authorities: cf Whincup ‘Inequitable Incorporation - The Abuse of Privilege’ [1981] 1 Company Lawyer 158. In the result, it is a matter of extreme difficulty to say whether the evidence adduced meets even the less than exacting requirements of the section. ...... If exercise of dominance be at least part of the test, what degree of domination is required?: cf Craig v Lake Asbestos of Quebec Ltd [1988] USCA3 493 ; 843 F 2d 145 (3rd Cir). If so, what is the extent of reliance on the parent that is required to be shown? Is under capitalisation a relevant factor? The law in Australia has not yet fully worked out answers to these and like questions.” [119] To the extent that these remarks amount to “reservations” I do not share them. In any event I consider the “reservations” to which His Honour and Commissioner Hampton refer are more properly to be construed as questions concerning the extent to which control can be considered a determinative factor and, if it is, the extent of the control that is necessary to persuade a Court or Tribunal to pierce the corporate veil. I am satisfied that this application is not affected by these “reservations” or questions because I have concluded that there are unlikely to be many situations where a subsidiary is controlled to a greater extent than that by which Jetconnect is controlled by Qantas. [120] In Smith Stone and Knight Ltd v Birmingham Corporation 43 (Smith, Stone and Knight) Justice Atkinson set out six questions for consideration when determining who was conducting a business. Asking those questions concerning the facts of this case, all questions must be answered in the affirmative. However, the level of involvement of Qantas in the affairs of Jetconnect goes far beyond the facts considered in Smith, Stone and Knight by Justice Atkinson and I believe must inevitably lead to the opposite conclusion than that drawn by the majority. [121] What Qantas has done in relation to conducting its trans Tasman flights and Jetconnect is to reverse the base from which flights are despatched and then comply with the consequential compulsory New Zealand regulatory outcomes, including those involving air safety. The rest is smoke and mirrors. [122] Jetconnect has no control over its operations, its finances or its industrial relations. Mr Daff, Jetconnect’s Chief Executive Officer, decides nothing significant. He decides no business strategy. He consults and then is directed concerning all decisions except the most insignificant. His ignorance concerning Jetconnect’s financial affairs is staggering. Finances are in someone else’s hands and that someone is an employee of Qantas. Mr Daff and his financial manager handle operational and financial matters at a divisional level only. Jetconnect banks almost nothing. It is indemnified for all expenses. Jetconnect’s operational function is limited to the immediate shopfloor operational concerns not involving any strategy. All strategy, both financial and operational, is a matter for Qantas. [123] Jetconnect’s industrial arrangements are a prime example. Its lawyers are eventually paid by Qantas and its industrial adviser is a person referred to Jetconnect by Qantas whose fees are also eventually paid by Qantas. Jetconnect has entered into individual contracts with pilots and had an industrial agreement with the New Zealand Air Line Pilots Association Industrial Union of Workers Inc (NZALPA) which expired on 26 May 2011. In entering into these arrangements Qantas set the negotiating table and dictated what was on it. Jetconnect did what it was briefed to do. [124] Mr Daff’s evidence was that Jetconnect is a significant independent international airline. However, every fact about which he gave evidence established the contrary. [125] The NZALPA CEA 2008 - 2011 (the certified agreement) contains the following clause: “PART 4 SECURITY OF EMPLOYMENT 4.1 UNDERTAKINGS 4.1.1 The Pilots recognise that Jetconnect is a wholly owned subsidiary of Qantas and consequently the Company may have little or no control over factors affecting its operations .” (my emphasis) [126] The Jetconnect Limited and Controlled Entity Annual Report 2009 44 , signed by Directors Colin Storrie and Cassandra Hamlin on 25 November 2009, contains the following statement: “...... The principal activity of the Company during the year was the employment and on-hire of cabin and technical crew to operate domestic commercial aircraft flights within New Zealand. From 10 June 2009 the Company only provides cabin and technical crew for Tran-Tasman flying .” (my emphasis) [127] The Jetconnect Limited Financial Report 2010 45 , signed by Directors Gareth Evans and Cassandra Hamlin, on 25 November 2010, contains the following statement: “...... The principal activity of the Company during the year was the employment and on-hire of cabin and technical crew to operate commercial aircraft flights for Tran-Tasman flying .” (my emphasis) [128] Mr Daff was unaware of these statements issued by Directors regarding the principal activity of Jetconnect. He does not agree with them. I am satisfied that the Directors’ statements reflect the factual position supported by the evidence of Jetconnect’s actual operations and that the certified agreement accurately states the position. Jetconnect has little or no control over factors affecting its operations. [129] The areas where Qantas holds total control are too numerous to list. It is simpler to examine the limited number of factors which speak against the conclusion that Jetconnect is the agent of Qantas and weigh them in the balance. These factors are Jetconnect’s incorporation in New Zealand, Jetconnect’s compliance with the statutory and regulatory requirements of New Zealand’s aviation and industrial laws, and Jetconnect’s contractual arrangements and certified agreement with pilots. These arrangements were and are necessary to achieve Qantas’ purpose which I am satisfied is to reduce costs by reducing the wages of pilots whilst still operating its trans Tasman route. These arrangements comply with New Zealand statutory obligations but I am satisfied that behind them Jetconnect operates as Qantas’ agent. [130] I have concluded that Qantas Airways Limited (Qantas) does not exercise “a very high degree of control” or “a considerable degree of control” in relation to Jetconnect. I have concluded that Qantas’ control over Jetconnect is total. [131] There were a number of discretionary factors relied on by Jetconnect which Jetconnect submitted weighed against any amendment of the award. The certified agreement between Jetconnect and its pilots expired on 26 May 2011. Now is perhaps a good time to consider these issues. I do not believe it is this Tribunal’s role to consider such matters in an application such as this. The application of the award is not a matter which should be set aside for discretionary commercial considerations. Qantas has entered into commercial agency arrangements with Jetconnect. It may have to reconsider them. [132] I am persuaded by AIPA’s submission that Jetconnect is a fully owned subsidiary of Qantas which is acting as the agent of Qantas for the operation of Qantas’ short haul operations and the employment of staff, including pilots. [133] The award is binding upon Qantas, and on Jetconnect as its agent, in respect of pilots employed by Qantas and by Jetconnect, in Qantas short haul operations, which operations include trans Tasman flights operated by Jetconnect. There is no ambiguity. The award does not require amendment. DECISION OF THE FULL BENCH [134] The Full Bench has decided not to make the variations to the Award sought by AIPA. Accordingly, and for the reasons given in the majority decision, the application is dismissed. SENIOR DEPUTY PRESIDENT Appearances : A. Moses, SC with I. Taylor and D. Mahendra of Counsel for the Australian and International Pilots’ Association. F. Parry, SC with R. Dalton of Counsel, C. Crimpton and N. Spark for Qantas Airways Limited and Jetconnect Limited. J. Fetter for the Australian Council of Trade Unions. Hearing details: 28 April 2010 27 July 2010 19 August 2010 1-3, 7-8, 22 February 2011 3 March 2011 11-12 April 2011 1 Jetconnect’s primary position was that its appearance in the proceedings was limited to making submissions to this effect and should not be taken as any consent to jurisdiction as to the regulation of Jetconnect or its employees. 2 [2002] WAIRComm 4778. 3 (1990) 94 ALR 679. 4 Australian Liquor, Hospitality and Miscellaneous Workers Union, Western Australian Branch v Burswood Catering and Entertainment Pty Ltd [2002] WAIRComm 4778. 5 Smith, Stone and Knight Ltd v Birmingham Corporation (1939) All ER 116 and Australian Liquor, Hospitality and Miscellaneous Workers Union, Western Australian Branch v Burswood Catering and Entertainment Pty Ltd [2002] WAIRComm 4778. 6 Sharrment Pty Ltd v Official Trustee [1988] FCA 179 ; (1988) 18 FCR 449 at 453. 7 See Salomon v A Salomon & Co Ltd [1896] UKHL 1 ; [1897] AC 22 at 30, [1895-9] All ER Rep 33 at 35 and Walker v Wimborne [1976] HCA 7 ; (1976) 137 CLR 1 and Industrial Equity Ltd v Blackburn [1977] HCA 59 ; (1977) 137 CLR 567. 8 Adams v Cape Industries Plc [1990] 1 Ch. 443 at 536-537.. 9 See generally Briggs v James Hardie & Co Pty Ltd (1989) 16 NSWLR 549 and Willcox v Federal Commissioner of Taxation [1988] FCA 123 ; (1988) 79 ALR 267. 10 (2003) 133 FCR 438. 11 (1990) 94 ALR 679. 12 See Pioneer Services Ltd v Yelnah Pty Ltd (1986) 5 NSWLR 254 per Young J. 13 [2004] HCA 55 ; (2004) 218 CLR 471. 14 Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55 ; (2004) 218 CLR 471 at [46] . 15 (2006) 158 IR 410. 16 Sharrment Pty Ltd v Official Trustee in Bankruptcy [1988] FCA 179 ; (1988) 18 FCR 449. 17 Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55 ; (2004) 218 CLR 471. 18 Department of Justice v Lunn (2006) 158 IR 410 at [36]. 19 See Premier Building and Consulting Pty Ltd v Spotless Group Ltd [2007] VSC 377. 20 See item 4 of Schedule 4 to the WR Amendment Act. 21 [2007] AIRC 420 per Kaufman SDP; and on appeal [2007] AIRCFB 796 22 See generally Short v FW Hercus Pty Ltd (1993) 40 FCR 511. 23 (1981-1982) 149 CLR 337. 24 Codelfa Construction Pty Ltd v State Rail Authority of N.S.W (1981-1982) 149 CLR 337 at 352. 25 Chief Commissioner of Police v Kerley [2008] FCAFC 41 ; (2008) 171 IR 420 at 436 per Jessup J. 26 (1996) 66 IR 182. 27 Ibid, at 184. See also Australasian Meat Industry Employees Union v Coles Supermarkets Australia Pty Ltd (1998) 80 IR 208 at 212 per Northrop J, and Ansett Australia Limited v Australian Licensed Aircraft Engineers Association [2003] FCAFC 209. 28 [2008] FCAFC 41 ; (2008) 171 IR 420. 29 Chief Commissioner of Police v Kerley [2008] FCAFC 41 ; (2008) 171 IR 420 at 436. 30 See Short v FW Hercus Pty Ltd (1993) 40 FCR 511. 31 s.559(1) of the WR Act. 32 Qantas Airways Limited Flight Crew (Short Haul) Workplace Agreement 2007. 33 [2007] AIRC 420 per Kaufman SDP; and on appeal [2007] AIRCFB 796 34 [2007] AIRC 420 , at pars. [25], [48]-[49]) 35 [2007] AIRCFB 796 at par [248] 36 Ibid, at par [73] 37 See sub- items 3 (3) and 5(1) of Schedule 2 to the Transitional Act 38 See s.512(2) and the definition of Australian employer in s.4(1) of the WR Act 39 The evidence reveals that on average the Jetconnect pilots stay overnight in Australia on two occasions each fortnight. 40 See Schedule 9 to the Transitional Act. 41 [2002] WAIR Comm 4778 and [2002] WA SCA 354. 42 (1989) 16 NSWLR 549 at 567 and 576. 43 [1939] 4 All ER 116. 44 Exhibit M11 page 394. 45 Exhibit M14. Printed by authority of the Commonwealth Government Printer <Price code G, PR510459>